29 October 2008

Net neutrality to boost broadband prices?

The price of broadband is set to rise massively if European regulators enforce strict net neutrality, according to a recent story in the FT. It could go up by 30 percent, one analyst reckoned. This raises a number of issues.

But before we get into those, let's lay out the facts. The concept of net neutrality means that a carrier will treat all data alike. Whether it's from the carrier's biggest client, whether it's kids downloading illegal software, or if it's just your emails, all data is given the same priority. The principle behind it is that the deepest pockets should not determine which traffic is prioritised; it doesn't mean for example that your voice over IP phone traffic cannot be prioritised.

One of the fathers of the Internet, Vint Cerf, reckons that net neutrality is vital: “It's vital to innovation. Companies like Google and Yahoo, and eBay and Amazon, and Skype, and so on, got their start without having to get permission from any ISP or any broadband provider to offer services,” he said on YouTube.

What the carriers are currently bellyaching about is a proposal from the EU that net neutrality be legislated. In other words, it'll become illegal for a carrier to discriminate in favour of traffic originating from its biggest client.

The proposal is part of a new telecoms package that aimed at overhauling the EU's telecoms laws. EU ministers are due to discuss the proposal in November.

But consultants at Copenhagen Economics say in a survey to be published next week that the imposition of net neutrality would result in higher costs being passed onto consumers, and so depress demand for broadband.

They even provide sample costs: Swedish broadband rates could rise from €33 to €44 in Sweden and from €29 to €39 in Germany. That's quite a rise.

The Centre for European Policy Studies reckons in a report that the mandating of net neutrality would be undesirable. Compromises proposed include by the CEPS softer legislation which would ensure that consumers are informed about a lack of net neutrality.

However, whatever you think of net neutrality -- and I for one am nowhere near alone in being a fervent supporter of the concept -- I can't help wondering why prices would rise so much if the concept were abandoned.

I've always assumed, it would appear incorrectly, that we currently operate under a regime of net neutrality, that my data take their turn with everyone else's, and are dealt with by the Internet's routers in a first come, first served fashion. If the legislation were passed and put into force, and prices rose by one-third as a result, imagine how much money ISPs are making in return for preferring MegaCorp's data over those of smaller companies or, for that matter, yours and mine.

Would legislating net neutrality really make that much difference to prices? And if it would, why haven't the carriers told the rest of their customers -- the disadvantaged ones -- about it?

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